It pretty much feels like every day we’re bombarded with news of how “uncertain” Britain’s economy is becoming because of Brexit. The value of the pound has been yo-yo-ing these last twelve months, while investment in companies has ground to a halt as no one really knows what the hell is going on.
But while the big companies are most worried about profits over anything else, what about us as individuals? How can we still invest and save our money when there seems to be uncertainty around every corner? Amid all the craziness, there is one investment type that is holding steady and provides minimal risk: the humble ISA.
Over 10.8 million of us subscribed to ISAs in 2017/18 with a sizeable increase in Junior ISAs. Firms like Scottish Friendly have said that even in this confusing time for investment, increases of 27% show people are getting savvy with how they invest their savings in an attempt to future (not Brexit) proof.
Whether the UK leaves the EU without a deal won’t have a massive impact on ISAs, but you may be wondering if investing at this time is worth it (and if there are any risks seemingly lurking on the horizon). To help dispel those worries, here are some key points that need to be known about ISAs and Brexit, whether they’re still worth it, and what to look out for. It all starts with knowing what your current ISA status is.
ISA Tip 1: You do realise you’re not stuck?
It seems to be the biggest myth in the ISA world is that your provider HAS to be your provider. Think of your ISA just like your mobile phone or internet provider. You have every right to switch it up if you’re not happy with your current ISA provider.
Most commonly, you would want to switch ISA providers if there is a better-fixed percentage rate by going with someone else. The GOV.UK website has a very concise guide on the steps that is clear to follow. You should know that when you switch, it’s between your now old and new providers to sort everything out. Cash ISAs should take no longer than 15 working days, while others can take up to a month.
And watch out for any company advertising special Brexit ISAs with cashback or higher rates for the short term; some of them offer what seems like good cashback lump sums, but may have higher annual fees to balance out on their end.
ISA Tip 2: Brexit-proofing doesn’t exist
Be cautious if your provider is advertising or heralding you towards anything deemed as “Brexit proofing” your ISAs. There was a lot of chatter around March 29, the original leave date, being the cut off for tweaking with your ISA. You may have even seen redundant advice on taking stock and share ISA accounts and transferring over a cash ISA. While jumping from stocks to cold hard cash sounds logical, cash ISAs work off of the current rate of sterling, i.e. if it falls, the value of the ISA does too.
You can’t Brexit proof any ISA, but you can invest wisely. If you do have a Stocks and Shares ISA remember that time is on your side. You’ll want to be thinking of where the ISA will be 3,5,7 years from now rather than the next assumed withdrawal date.
ISA TIP 3: Know your limits
The majority of us investing in ISAs do so because of the tax benefits tied in. You pop in a certain amount to tidy away for a rainy day, and you won’t get taxed on it.
Usually, the annual allowance gets ever so slightly bigger each year, but moving from the 2019 to 2020 tax year, the allowance on the majority of ISA types has not budged and remains at £20,000. Only with Junior ISAs did the allowance increase from £4260 to £4368, making it a good time to open one for a younger family member.
Remember too that allowances don’t carry over from year to year. If you’re worried you won’t make the tax savings you want, you can always split your allowance across all your ISAs if it helps in the long run.
ISA Tip 4: Brexit has made Lifetime ISAs exciting
Still relatively new, Lifetime ISAs (LISAs) have been almost swept under the rug in all the investment chatter because many investors don’t see the value. Why don’t they see it? Because LISAs are amazing for people who never ever invest, but simply want to buy a home in the near future.
Young couples worried about how to drum up savings for a house with Brexit on the horizon need to know that a LISA can help you get a 25% state bonus annually on your investment – that’s for each of you opening your own LISA. If neither of you owns the property, you’re both eligible so don’t pool together to have a LISA under one person when there are savings afoot.
And open one when you have even the faintest hint of wanting to get home. You have to have a LISA for at least one year before it can be used towards buying a home; so while all the Brexit confusion is going on, you can steadily save a good chunk of a deposit for a home without much risk. There’s a great guide on LISA hacks at Money Saving Expert you should check out if you are new to it all.
Finally: Embrace the peaks and troughs
With all the stock market volatility, you might be put off investing your money in an ISA. The majority of us Brits tend to leave it until the end of the tax year to pop money in an ISA just to meet the allowance. There is something to be said though for investing as early as possible. You have the potential for greater growth in your investment, and your ISA could be much stronger 12 months from now. So even when Brexit is finally over and done with, you’ll have a stronger ISA to look at.